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Home My WebLink About02.a. (Handout) Financial Planning WorkshopAgenda Item 2.a. Central Contra Costa Sanitary District Board Workshop Financial Planning and Sewer Service Charge Review For the Fiscal Year 2013 -14 10 -Year Budget Process January 24, 2013 N Central Contra Costa Sanitary District � Protecting Public Health and fhe Environmenf'�' "' `� Overview of Today's Workshop 1) Basic Rate - Setting Approach 2) Debt Financing and Cost 3) Model Assumptions 4) Financials 5) Items That Impact Rates 6) Proposed Rate Increase 7) Staff Recommendation 8) Prop 218 Timeline 9) Receive Board Direction Basic Rate - Setting Approach 0 - Central Contra Costa Sanitary District _i `'' �' ,•ts Profecting Public Health and the Environment - =E Rate - Setting Approach Since 2001 Use Financial Cash Flow Model to analyze policy issues and predict future rates: 10 -Year Planning Horizon • Pay as you go approach • Assumes use of Reserves to allow smooth modest annual SSC increases • No short -term borrowing • Generally Reserves are Drawn down so Funds Required are equal to Funds Available by the 10tH year (Board Policy starting in 2012 -13 10 year plan an additional $20M was added to fund projects in the future) 3 Central Contra Costa Sanitary District Funds Available Compared to Funds Required by Year Scenario 2.2013 Baseline Scenario $100,000,000 $90,000,000 � Increased Funds Available for large projects in the next five years; new solids treatment (digesters or new furnaces). $80,000,000 Alternatively, funds could be used to paydown unfunded liabilities. $70,000,000 $60,000,000 - N r. c $50,000,000 _ -- o _- $40,000,000 _ — Me i - — -- — - $30,000,000 - - — -- -- - - -- -- -- - -- - - $20,000,000 i $10,000,000 $0 20119-2010 2010. 2011 2011- 2012 2012- 2013 2013- 2014 2014- 2015 2015. 2016 2016- 2017 2017- 2018 2018. 2019 2019- 2020 2020. 2021 2021- 2022 2022.2023 TOTAL RWS AVALABLE 73,441,883 61,999,931 $554,999,999 47,420,532 44,945,736 47, 522, 566 48, 794, 120 46, 522, 636 50, 343, 083 56,45Q149 54 ,093,279 58,755,072 56,869,260 74,192,852 — - TOTALFUNDSREQUIRED 32 ,660,271 33,560,131 $37,741,375 37,976,514 38,450,075 39,246, 655 44,520,419 44,736269 46,934, 511 53, 959, 497 54,102,5 57,614,198 54,000,205 55,088,327 Fiscal Year y Debt Financing and Cost Il Central Contra Costa Sanitary District '� Debt Financing and Cost Wells Farao Line of Credit (LOC Depends on intent of LOC (Capital vs O &M) • Commitment Fee for setting up the LOC, Example $10M LOC x 1 % _ $100,000 • Monthly Unused Fee for No Use • Monthly Adjustable Interest on Balance (Libor + 3 %) _ $5M bal x 4%/365x3O=$16.4k Other Possibilities • Contra Costa County • US Bank r Cost of 2009 Bonds Bond Name Proceeds Interest Government Subsidy Issuance Cost Total Cost 2009A • Build America Bonds (federally taxable) $19,635,000 $18,881,860 ($6,608,651) 20096 • Wastewater Revenue COP $34,490,000 $8,102,219 $403,512 Total $54,125,0001 $26,984,080 $6,608,651 $403,5121 $20,118,941 Board Policy for Bond Financing • Unanticipated opportunities • Unanticipated projects Why it's Prudent to Have Cash Reserves Funds Available > Funds Required • Allows for rate stabilization from year -to -year given variation in Capital Program • Able to Prefund CCCERA ($500K Savings) • Dollar Cost Averaging on PARS GASB 45 Trust Payment • Coverage for Unexpected Events • Acts as a Sinking Fund • Possibility of State Taking Ad Valorem Tax • Great Bidding Climate allows for Accelerated Payments for Projects • Hard to Replace Once Spent • Avoids Borrowing Fees and Staff Time Allows for Greater Interest Income Model Assumptions 1) Central Contra Costa Sanitary District `' y'` Protecting Public Health and the Environment'`' Model Assumes Continuation of District goals • Excellent Customer Service • Regulatory Compliance • Responsible Rates • Being a High Performance Organization • Addresses Capital Program needs and challenges over next decade • Addresses Unfunded Liabilities • Assumes cash flow payment of Nitrification ,d Major Model Assumptions • Annual obligations of its four major liabilities 13/14 - CCCERA retirement $15.7M - GASB 45 Trust funded each year (ARC) $ 3.7M - Outstanding debt payments $ 5.6M - Accrued compensated absence Minimal • Medical, Dental, and Life Insurance (Active and Retirees) $10.5M • Vacancy factor of 2% for salary and 3% for benefits • Sewer Construction Capital Expenditures $29.6M Property tax income held flat at 0% for the next 2 years • Additional CCCERA UAAL pay down $75M over 10 years • Line item expenses increased based on past years experience Financials Central Contra Costa Sanitary District Protecting Public Health and the Environment Operations and Maintenance 2012 -13 Budget vs Projected Revenues Expenses Revenues Over Expenses Increase in Revenues Sewer Service Charge Concord Cogen Reimb Increase in Expenses Cogen Salaries (0% COLA budgeted, retro of 14mo) All Other 2012 -13 2012 -13 L+z--j Budget Projected Variance $70.21VI $73.1M $2.91VI 68.31VI 70.21VI (1.9M) 1.9M 2.91VI 1..OM $0.5M 0.9M 1.5M $1.51VI 0.8M (0.4M) /3 2012 -13 Capital Program Mid -Year Projection 2012 -13 Capital Program Budgeted Projected Total Expenditures $ 32.3 million $29.3 million Total Revenue $ 21.8 million $21.8 million Variance ($10.5 million) ($7.5 million) SCIF Balance 6/30/13 $ 35.8 million $38.8 million (Beginning balance 6/30/12 $46.3 million) / `I Items that Impact Rates 1) Central Contra Costa Sanitary District 15 Protecting Public Health and the Environment Fiscal Yea 2001 -200 2002 -200 2003 -200 2004 -200 2005 -200 2006 -200 2007 -2008 2008 -2009 2009 -2010 2010 -2011 2011 -2012 2012 -2013 SSC Rate History Annual Sewer Service Charge r Operations Capital Total 2 204 20 224 3 207 41 248 4 218 54 272 5 204 76 280 6 234 46 280 7 213 76 289 242 58 300 260 51 311 292 19 311 300 11 311 302 39 341 344 27 371 2013 -2014 335 70 405 2014 -2015 372 67 439 1 YR SSC SSC % Increase Increase 24 12.0% 24 10.7% 24 9.7% 8 2.9% 0 0.0% 9 3.2% 11 3.8% 11 3.7% 0 0.0% 0 0.0% 30 9.6% 30 8.8% 34 9.2% 34 8.4% Capital % Portion SSC 8.9% 16.5% 19.9% 27.1% 16.4% 26.3% 19.3% 16.4% 6.1% 3.5% 11.4% 7.3% 17.3% 15.3% 2013 -2014 335 70 405 2014 -2015 372 67 439 1 YR SSC SSC % Increase Increase 24 12.0% 24 10.7% 24 9.7% 8 2.9% 0 0.0% 9 3.2% 11 3.8% 11 3.7% 0 0.0% 0 0.0% 30 9.6% 30 8.8% 34 9.2% 34 8.4% Capital % Portion SSC 8.9% 16.5% 19.9% 27.1% 16.4% 26.3% 19.3% 16.4% 6.1% 3.5% 11.4% 7.3% 17.3% 15.3% 1 YR SSC SSC % Increase Increase 24 12.0% 24 10.7% 24 9.7% 8 2.9% 0 0.0% 9 3.2% 11 3.8% 11 3.7% 0 0.0% 0 0.0% 30 9.6% 30 8.8% 34 9.2% 34 8.4% Capital % Portion SSC 8.9% 16.5% 19.9% 27.1% 16.4% 26.3% 19.3% 16.4% 6.1% 3.5% 11.4% 7.3% 17.3% 15.3% 34 9.2% 34 8.4% Capital % Portion SSC 8.9% 16.5% 19.9% 27.1% 16.4% 26.3% 19.3% 16.4% 6.1% 3.5% 11.4% 7.3% 17.3% 15.3% Capital Program Has Been Deficit Spending Since FY 2004 -05 $70.0 $65.6 $30 M Net Bond Sale (Nov /Dec 2009) $60.0 $56.9 $57.3 $55.2 Sewer Construction Fund $53.8 $51.8 $51.7 $52.1 Balance $50.0 $47.8 $46.3 $44.3 $� 4 $45.0 $39.6 U) $40.0 $35.3 $35.8 C Annual Expense $367 $335 0 $30.0 $36.3 $32.3 $30.2 $31.4 - $2'x•7- - $33.4 - _ 29.1 -$28.6 c $30.0 $25.4 $28.4 28.0 24.8 .6 $28.2 $28.2 $248 Annual Reven $262 $21.6 $26.5 $21.9 $20.0 $23. $18.9 - 19.8 $21.7 $21.9 $20.6 $17.0 $15.8 $10.0 - - -- - - - -- $0.0 2013 -14 2014 -15 2012-113 1999 -00 2000 -01 2001 -02 2002 -03 2003 -04 2004-05 2005-06 2006-07 2007 08 2008 -09 2009 -10 2010 11 2011 -12 Budget Recommended $18.9 $17.0 $23.5 $28.2 $30.0 $24.8 $36.3 $35.3 $28.4 $21.9 $15.8 $21.7 $21.9 $29.6 $28.6 $21.6 -qir- Annual Revenue `$20.6 $28.2 $31.4 $25.4 $19.8 $26.5 $27.7 $39.6 $33.4 $36.7 $29.1 $28.0 $24.8 $32.3 $29.6 $26.2 -dr-Annual Expense �0-SCF Balance $56.9 $47.8 $44.3 $45.4 $53.8 $57.3 $55.2 $51.8 $51.7 $45.0 $65.6 $52.1 $46.3 $35.8 $30.2 $33.5 Total Sewer Service Charge per RUE and the Operations and Capital Components $500 1 $439 $450 Total Charge per RUE $405 $400 $371 $372 $341 $350 n $344 $311 $311 $311 $300 $300 $272 $280 $280 $289 $302 $300 $248 $260 $292 $250 $224 234 $200 �. u $218 $213 $242 Operations Component $204 $200 '— $207 x$185 $204 $150 $100 $76 Capital Program Component $67 $76 $58 $70 $41 $51 $50 $20 $54 $46 39 $15 $19 $11 $27 $0 2000-01 2001 -02 2002-03 2003 -04 2004 -05 2005-06 2006 -07 2007-08 2008 -09 2009 -10 2010.11 2011 -12 2012 -13 2013 -14 2014 -15 1 Items that Impact Rates Major Expense Increases 2013 -14 11 Percentage Increase Dollars Labor 4.4% $1.1 Million Benefits 7.8% $2.3 Million Utilities 6.6% $0.3 Million Total $3.7 Million 11 Rate - Setting Facts $1 SSC Increase = $170,000 1 %Salary Increase = $2 SSC • O &M rising > CPI due to salary &benefits • 5.5 year contract with minimal cost savings • Significant PEPRA savings are outside this 10 year plan PROPOSED RATE INCREASE MEETS CURRENT DISTRICT MISSION AND VISION, REDUCES LIABILITIES, AND FUNDS CAPITAL PROGRAM WITH A STEADY RATE INCREASE BUILDS RESERVES (UNFUNDED LIABILITY AND NITRIFICATION) Central Contra Costa Sanitary District `� Financial Report Summary of Scenarios Scenario ID Description 2013.14 Rate Increase 201415 Rate Increase 201&16 Rate Increase 2016.17 Rate Increase 2011.18 Rate Increase 201 09 Rate Increase 1 2019-20 Rate Increase 202x21 Rate Increase 2021.22 Rate Increase 2021.22 Rate Increase Wear Ending Total Previous Scenario. 1 $ 38 $ 38 $ 38 $ 36 $ 36 $ 36 $ 36 $ 36 $ 36 WA $ 101 2012 Financial Plan Current Scenario. 2013 2 $ 34 $ 34 $ 34 $ 34 $ 34 $ 35 $ 35 $ 34 $ $ $ 645 Financial Plan Staff Recommendation Central Contra t Sanitary District °?'3 Staff Recommendation $34 per year SSC increase for 2 years •Supports District goals Excellent Customer Service Regulatory Compliance Responsible Rates Being a High Performance Organization • Addresses Capital Program needs and challenges over next decade • Addresses Unfunded Liabilities • Assumes cash flow payment of Nitrification a y Recommended Scenario $34 Per Year SSC Increase $100,000,000 $90,000,000 increased Funds Available for large projects in the next give veers: new solids treatment (digesters or new turns=&). $80,000,000 - - °� - -- -- - -- -- - Alternatively, funds could be used to psydown unfunded liabilities. $70,000,000 $60,000,000 i $50,000,000 - - $40,000,000 - - - - - - $30,000,000 i i $20,000,000 $10,000,000 $0 2009- 2010 2010- 2011 2011 -2012 2012 -2013 fZ23-,2014 2014 -2015 2015- 2016 2016-2017 2017 -2018 2018 -201$ 2019 2020 2020.2021 2021- 2022 2022 -2023 TOTAL FUNDS AVAILABLE _7_3.441.893 _ 61.999.931 554.988.999 47.420.532 .738 47.52_2.566_ 48,794.120 46.522,636 50,343.093 56,458.149 54,0 56.9260 -TOTAL FUNDSREOUIRED 32.680.271 33.560.131 537,741,375 37, 976. 514 38, 450, 075 39. 246,655 44.520, 419 44.7362 46,934,511 53.959.497 54.102,505 - 57.614,198 54,000.205 55,098.327 Fiscal Year Planning Year Actual Actual Projected » >> 1 2 3 4 5 6 7 8 9 10 2010.2011 2011.2012 2012 -2013 2013. 2014 2014- 2015 2015. 2016 2016- 2017 2017.2018 2018 -2019 2019.2020 2020 -2021 2021 -2022 2022 -2023 Assumptions: Annual Sewer Service Charge /RUE 163,658 164,491 165,291 166,091 166,941 167,841 168,791 169,791 170,841 171,941 173,091 174,291 I75,541 New Connections (RUE) for the labeled F.Y.. 519 833 800 800 850 900 950 1,000 1,050 1,100 1,150 1,200 1,250 Sewer Service Charge Rate - Debt Service 0 0 0 0 0 0 0 443 0 444 0 460 0 466 0 464 0 508 0 437 Sewer Service Charge Rate - 0 &M 300 302 344 33S 372 433 64 97 116 145 181 137 208 Sewer Service Charge Rate - Capital 11 39 I7 70 67 40 473 507 541 576 611 645 645 645 Total SSC Rate 311 341 371 405 439 34 34 35 35 34 a easeto,�ate: S 0 30 30 34 9.16% 34 8.40% 34 7.74% 7.19% 6.71% 6.47% 6.D8% 5.56% 0.00% 0.00% IrtcreasetoRate -% 0.00% 9.65% 6.80% 5,797 5,987 6,177 6,364 6,548 6,727 6,903 7,074 7,241 7,404 7,562 Connection Fee - GravityZone 5,451 5,465 a5 - Current Sewer Service Charge Rankings for Bay Area Agencies Revised January 2, 2013 (Rates in effect on January 1, 2013) AVR 121 per Rank from 12-13 connection, if SSC plus lowest (with Agency SSCI') known AVR AVR) Comments Santa Rosa $1,132 N/A $1,132 25 Effective 1/1/13. Petaluma $994 N/A $994 24 Effective 1/1/13. Future CPI increases approved. Rodeo Sanitary District $695 $57 $752 22 Effective August 2012 Crockett Sanitary District $632 $219 $851 23 No increase in FY 2012 -13 Ironhouse Sanitary District $618 $10 $628 21 Sells cattle and hay to offset rates. Richmond $603 N/A $603 20 Increasing to $633_ in 13 -14 Brentwood $565 N/A $565 19 Oakland (EBMUD for treatment) $557 N/A $557 18 Increasing to $614 on 1/1/14 Benicia $551 N/A $551 17 Effective 1/1/13. Four more annual increases (to $678) approved. 2012 -13 Mean Rate of Agencies Surveyed $502 Berkeley (EBMUD for treatment) $496 WA $496 14 Vallejo $495 N/A $495 13 Increasing to $507 on 7/1/13 and to $520 on 711/14 Novato $495 $64 $559 16 _ Increasing to $514 in 13 -14; $533 in 14 -15; $552 in 15 -16. Mountain View Sanitary District $491 $27 $518 15 No increase in 2012 -13 Livermore $489 N/A $489 12 No in 201.2 -13 Pittsburg (DDSD for treatment) $454 $19 $473 10 _increase Napa Sanitation District $448 N/A $448 9 Annual CPI increases approved for future years. CCCSD 2014-15 Proposed Rate $439 $73 $512 Pleasanton $427 N/A $427 7 Automatic CPI increase every July 1 Bay Point (DDSD for treatment) $412 $62 $474 11 Includes $34 collection system replacement/rehab fee collected on tax roll. CCCSD 2013 -14 Proposed Rate $405 $73 $478 Stege SD (EBMUD for treatment) $396 $20 $416 6 Antioch (DDSD for treatment) $385 $20 $405 5 CCCSD 2012 -13 Current Rate $371 $73 $444 8 Effective 7/1/12 Fairfield (FSSD) $360 WA $360 3 Dublin San Ramon Services District $355 $13 $368 4 Annual CPI increases approved for future years. Concord (CCCSD for treatment) $324 N/A $324 2 Pays for HHW Service from garbage franchise fees. Union Sanitary District $320 WA $320 1 West County Wastewater District $304 $20 $324 2 Annual increases to $330, $353, $377 approved. Oro Loma Sanitary District $189 N/A $188 lowest Annual increases to $195, $200, $206 approved. Rates In effect on January 1, 2013 unless noted. n1 Data from prior years: current year data not available. Annual Sewer Service Charge per Single Family Residence, or SFR. (2)AVR = ad valorem (property tax) revenue; data from CCC Auditor- Controller's Report on 2011 -12 Property Tax Administration Charges. Where AVR Is not known, adjusted rate includes only SSC. Receive Board Direction Central Contra Costa Sanitary District �7 -- i Budget Policy Issues ❑ Confirm District goals and strategic issues ❑ How Have for 2013 -14 & 2014 -15 full cost recovery for all fees, charges, and services ❑ Confirm how to address liabilities: • Other Post Employment Benefits (CASB45 /OPEB) • Retirement Unfunded Actuarial Accrued Liability (UAAL) • Outstanding Debt • Accrued Compensated Absence ❑ Plan to pay -as- you -go for Nutrient project? ❑ How much to increase SSC Rates for 2013 -14 & 2014 -15 ❑ Consider short -term debt ❑ If SSC Rate not increased, what programs should be modified? Prop 218 Timeline 1) Central Contra Costa Sanitary District °2 I Protecting Public Health and the Environment ' -" Prop 218 Deadlines Jan 24 Financial Workshop - discuss SSC increase Feb 7 Board receives draft Prop 218 notice (Board meeting) Feb 21 Board decides on $ amount of increase and (Board meeting) number of years, set public hearing for 6/6 Board vote required Mar 7 Drop dead date for Board vote if not decided (Board meeting) on 2121 June 6 Public Hearing to set rates (Board meeting) (30 Central Contra Costa Sanitary District Board Workshop Comments and Questions 3-1